Asian currencies have yet to feel

Asian currencies have yet to feel the full force of the ``oil shock'' and will decline even if the price of crude falls to $100 per barrel, Morgan Stanley says.

Record fuel import costs have sent the current-account balances of South Korea, India and Thailand into deficit, posing ``tremendous headwinds'' for the economies, said Stephen Jen, chief currency economist at Morgan Stanley in London. The impact on inflation and consumer spending has been limited because of fuel subsidies that aren't sustainable, he said.

``The biggest shock to Asia is not the U.S. housing crisis but the oil shock,'' Jen said in an interview. ``Asia was not built on $100 per barrel oil. Even if oil prices stabilize at $100, Asia will have a lot of work to do.''

Crude fell 15 cents to $126.62 a barrel as of 11:20 a.m. Singapore time on the New York Mercantile Exchange, 75 percent higher than a year ago.

Indonesia's rupiah, the Philippine peso and India's rupee will be ``first to go'' as these countries' governments are the least able to maintain subsidies, Jen said.

The rupiah will slide 2.6 percent to 9,367 per dollar this year, the peso 3.4 percent to 45.82, and the rupee 6.4 percent to 45.23, he predicts. South Korea's won will decline 6 percent to 1,076 a dollar and Malaysia's ringgit 3.5 percent to 3.38 per dollar, he added.

Crude prices this week fell to 12-week lows on speculation that global demand will wane as housing slumps and tighter credit curbs economic growth in the U.S. and Europe. Crude is down 14 percent from the record $147.27 reached July 11.

Yen Rises as AIG Losses Prompt Investors to Trim Carry Trades

The yen rose against 13 of the world's 16 most-active currencies as widening credit-market losses spurred investors to reduce holdings of higher-yielding assets financed in Japan.

The currency gained against the New Zealand dollar and the Norwegian krone as traders reduced so-called carry trades. American International Group Inc., the world's largest insurer by assets, said it may have underestimated a decline in the value of derivative holdings. The euro traded near a three-week low versus the dollar before a report that will probably show the weakest German investor confidence in 15 years.

``I am quite yen-bullish,'' said Michiyoshi Kato, a senior vice president of currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest publicly traded lender by assets. ``Subprime debt problems are far from over. The markets will remain shaky, buoying the yen.''
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Yen Falls as Stock Gains Spur Investors to Seek Higher Yields

The yen fell against all 16 of the most-active currencies as a rally in Asian stocks prompted investors to purchase higher-yielding assets funded in Japan.

The currency dropped the most versus Norway's krone, a favorite for so-called carry trades, before a U.S. government factory orders report that may show business spending is holding up in the world's biggest economy. The euro rose on speculation the European Central Bank will keep interest rates at a six-year high this week.

``The U.S. probably won't fall into a recession, supported by a strong corporate sector,'' said Koji Fukaya, a senior currency strategist at Deutsche Securities, the Tokyo unit of Deutsche Bank AG, the world's largest currency trader. ``There are expectations stocks have already bottomed out. This is leading to yen-selling.''

The yen declined to 158.22 per euro as of 7:52 a.m. in London from 157.67 late in New York on Feb. 1. It was at 106.76 versus the dollar from 106.49. The currency may fall to 110 per dollar by the end of March, Fukaya said.

The yen slumped to a three-week low against the Australian dollar, weakening 0.5 percent to 96.76. It dropped 0.7 percent to 19.7005 versus the Norwegian krone and declined 0.6 percent to 210.47 to the British pound.
read more:Yen Falls as Stock Gains Spur Investors to Seek Higher Yields

Yen Rises as Credit-Market Losses Sap Demand for Higher Yields

The yen gained against 15 of the 16 most-active currencies on speculation credit-market losses will prompt investors to sell higher-yielding assets.

The currency rose the most versus Australia's dollar after U.S. regulators started probing the finance industry over the collapse of the subprime mortgage market. The dollar snapped two days of gains versus the yen on speculation the Federal Reserve will cut interest rates by 50 basis points today, reducing the allure of U.S. debt.

``The subprime problems don't seem to be fully resolved yet,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``Investors are still very averse to taking on risk. It's a factor for buying the yen.''

The yen climbed to 106.73 against the dollar at 1:48 p.m. in Tokyo from 107.11 late in New York yesterday. It also rose to 157.62 per euro from 158.27. It will advance to 106.70 versus the dollar and 157.50 against the euro today, Ishikawa forecast.

The currency rose 0.5 percent to 94.79 per Australian dollar from 95.25. Declines in higher-yielding currencies accelerated after the MSCI Asia-Pacific Index fell 1 percent, reversing an earlier rally.

The yen is set for a monthly gain versus all 16 of the most-active currencies, rising 9.5 percent this month versus the South African rand to 14.8738, and 5.6 percent against the South Korean won to 8.84041.

read more:Yen Rises as Credit-Market Losses Sap Demand for Higher Yields

Yen Rises as Stock Slump Spurs Sales of Higher-Yielding Assets

The yen rose against all 16 of the most-active currencies as Asian stocks slumped, prompting investors to sell higher-yielding assets outside of Japan.

The currency gained the most against the South African rand as China's benchmark stock index declined almost 7 percent, adding to concern global economic growth will slow. The pound dropped against the dollar after an industry report showed U.K. house prices fell for a fourth month.

``Asian stocks, especially in China, are really performing badly,'' said Kenichi Yumoto, senior dealer in Tokyo at Societe Generale SA, France's second-largest bank by market value. ``This is causing risk aversion among investors, prompting yen- buying.''

The yen gained to 106.61 per dollar at 8:07 a.m. in London from 106.72 in New York Jan. 25. The currency climbed to 156.38 per euro from 156.68. Against the euro, the dollar was at $1.4670 from $1.4681. Japan's currency may rise to 105.80 per dollar and 155 a euro today, Yumoto said.

Japan's currency jumped 0.7 percent to 14.8266 versus the rand and rose 0.4 percent to 210.76 per pound from 211.66. It climbed 0.2 percent to 105.63 against the Canadian dollar. The MSCI Asia-Pacific Index of regional shares fell 3.2 percent, as China's CSI 300 Index slumped 6.8 percent.

Britain's currency weakened against all 16 of the most- active counterparts tracked by Bloomberg and fell to $1.9767, from $1.9831. The average cost of a home in England and Wales fell by 0.3 percent in January, according to Hometrack Ltd., a London-based research group.

read more:Yen Rises as Stock Slump Spurs Sales of Higher-Yielding Assets

Bank of Japan votes unanimously to keep overnight call rate target unchanged

TOKYO (Thomson Financial) - The Bank of Japan kept its overnight call rate target unchanged at 0.5 percent for the 13th straight meeting Tuesday, as widely expected.

This gives the Japanese central bank time to assess whether the financial market turmoil triggered by the credit crisis in the US will settle down soon, and whether weakness in the US housing market poses further material downside risk to its economy, given that the US is one of Japan's most important trading partners.

The Japanese central bank also needs to ascertain whether the Japanese economy can maintain its recovery momentum despite emerging uncertainty about domestic private demand and the appreciation of the yen.

The Bank of Japan said the nine members of its policy board voted unanimously to leave the rate unchanged.

read more:Bank of Japan votes unanimously to keep overnight call rate target unchanged

Everyone Loves Yen in Subprime World of Slowing U.S.

Jan. 15 (Bloomberg) -- The poorer the prospects for the U.S. economy, the more attractive Japan's yen is to Alan Eisner.

The hedge fund manager at Millennium Global Investments Ltd. in London says slower growth in the U.S., Japan's biggest export market, will cause Japanese investors to pare their overseas purchases. At the same time, the most volatile exchange rates this decade are forcing traders to buy yen to repay loans denominated in the currency.

``Now is a good time to buy,'' said Eisner, a senior managing director at Millennium, which has $13.3 billion in assets. ``When the world is doing well, then Japanese investors are very happy to invest abroad. When the world is not looking so great, the dynamic works the opposite way.''

Investors and traders are buying Japan's currency even as its broadest rally in eight years threatens to derail the nation's economy. The country relies on exports for most of its growth and has a 50 percent chance of recession, according to Goldman Sachs Group Inc. Automakers Mazda Motor Corp. and Nissan Motor Co. have tumbled more than 10 percent this month on concern that the rising currency will erode earnings.

``We're looking to buy yen,'' said Paresh Upadhyaya, a senior vice president at Putnam Investments LLC in Boston who helps manage $29 billion in currencies. ``The pillar of yen weakness, a buoyant global environment coupled with low volatility, has flipped.''

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Yen Rises as Drop in Stocks Spurs Investors to Cut Carry Trades

Jan. 10 (Bloomberg) -- The yen rose against 15 of the 16 most-active currencies as a decline in Asian stocks spurred investors to cut overseas holdings of higher-yielding assets funded by loans in Japan.

The Japanese currency gained the most versus the British pound and Australian dollar as investors cut so-called carry trades on concern the global economy will cool. The pound also fell against the euro before the Bank of England meets on interest rates today, with a Credit Suisse index showing 61 percent odds of a cut in the benchmark from 5.5 percent.

``With stocks falling sharply, investors' tolerance of risk has been damaged,'' said Tetsuhisa Hayashi, chief currency trader in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly traded lender by assets. ``More than a few investors are selling overseas assets by paring carry trades.''

The yen climbed to 109.81 against the U.S. currency as of 8:13 a.m. in London from 110.04 yesterday in New York. It traded at 161.03 per euro from 161.31. The MSCI Asia Pacific Index of regional shares fell 1.2 percent, snapping two days of gains, and the Nikkei 225 Stock Average dropped 1.5 percent.

Japan's currency may rise to 90 a dollar by March 31, Hayashi forecast.

The euro traded at 74.97 pence after rising to a record high of 75.10 pence, and bought $1.4663 from $1.4659. European Central Bank policy makers also meet today and are forecast to keep borrowing costs at 4 percent. The Bank of England will announce its decision at noon in London and the ECB at 1:45 p.m. in Frankfurt.

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Yen Advances as Stocks Decline, Investors Reduce Carry Trades

The yen rose against all of the world's 16 most-active currencies as a slump in Asian stocks prompted investors to cut holdings of higher-yielding assets funded in Japan.

The yen climbed the most against the New Zealand dollar, a favorite of so-called carry trades. Japan's currency also advanced from the lowest level in more than a month against the dollar as Japanese exporters bought yen, betting it will resume a five-month rally.

``Falling share prices are causing risk reduction,'' said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust & Banking Co. Ltd., a unit of Japan's largest brokerage. ``This is buoying the yen.''

The yen rose to 113.02 against the dollar as of 7:00 a.m. in London from 113.27 on Dec. 14, when it fell to 113.60, the lowest since Nov. 7. The Japanese currency also climbed to 163.22 per euro from 163.45 on Dec. 14. Japan's currency may move between 111 and 114.30 per dollar for the rest of the year, Amikura forecast.

read more:Yen Advances as Stocks Decline, Investors Reduce Carry Trades

Dollar's Rise May Stall at 114.42 Yen, RBC Capital Markets Says

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Dec. 14 (Bloomberg) -- The dollar's 1.1 percent advance against the yen this month may stall at 114.42, said George Davis, chief technical analyst at RBC Capital Markets, a unit of Canada's biggest bank in Toronto.

The daily stochastic oscillator chart shows the U.S. currency's gains are excessive, said Davis in a research note yesterday. The dollar's 14-day stochastic oscillator was 96 today, according to data compiled by Bloomberg. A level above 80 suggests the currency has climbed too fast.

``We note that the daily studies are locked at overbought extremes,'' Davis said. Stochastic oscillator charts measure the price of a security relative to its highs and lows during a particular period to try to predict a rise or fall.

The dollar traded at 112.45 yen as of 12:28 p.m. in Tokyo from 112.21 yen late in New York yesterday. It has fallen 5.5 percent versus the yen this year.

read more:Dollar's Rise May Stall at 114.42 Yen, RBC Capital Markets Says

Yen Falls to One-Month Low Against Dollar as Fed May Cut Rates

Dec. 11 (Bloomberg) -- The yen declined to a one-month low versus the dollar and the euro on speculation the Federal Reserve will cut interest rates today, encouraging investors to buy higher-yielding assets funded by loans in Japan.

Japan's currency fell the most against the Australian and New Zealand dollars, favorites for so-called carry trades, as global equities advanced and investors bet a rate reduction will support the global economy. Futures contracts show investors see a 100 percent likelihood the Fed will lower its benchmark overnight rate by at least a quarter-percentage point to 4.25 percent to keep a housing slump from sparking a recession.

``Stock markets have shown signs of stabilizing, and that will make investors more comfortable to sell the yen,'' said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd., a unit of Japan's second- largest publicly traded lender.

The yen declined to 111.94 per dollar, the lowest since Nov. 9, before trading at 111.76 at 12:35 p.m. in Tokyo from 111.71 late in New York yesterday. It may fall to 112.20 today, Ito said. Japan's currency also slipped to 164.66 per euro, the weakest since Nov. 9, before trading at 164.54 from 164.33.

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Yen Benefited From Credit Stress

The market is still cautious about the credit tightening issue, which put the dollar under pressure and encourages carry trades.

One of the biggest credit rating agency, Moody’s Investors Service, said last Friday it is preparing to lower credit ratings on 105 billion of debt since the subprime mortgage financial crisis.

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Yen Fall as Global Stocks Surge

The yen fell versus high-yielding currencies as global stocks rebounded this week. Carry trades came back to the market as investors regained their risk appetite.

The greenback gained as US corporations squared positions to realize profits on financial statements by the end of the month. The euro dipped to lower 1.46 versus the dollar, and the sterling fell to below 2.06.
read more:Yen Fall as Global Stocks Surge


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Yen Gained On Risk Aversion

The dollar fell below 109 against the yen for the first time since June 2005. The sterling dipped to as low as 222.48 from 227.50 versus the yen, while the euro fell to 160.10 against the yen.


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Can China Dump the Dollar?

I recently read an interview in the Washington Post with Brad W. Setser, the Council on Foreign Relation’s currency expert. One of answers he gave was pretty revealing in terms of what China can and cannot do. First, here is a little background he gives on why China and other export-driven emerging economies do not want currency appreciation against the dollar....

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